By late July I was emotionally exhausted. I was about a month into my accelerator program, which required me to slice, dice and analyze every aspect of my business. That alone was tiring. Doing it while failing to break even almost daily was excruciating. I’d applied for and thankfully gotten a loan to hold me over until (hopefully) my sales were high enough to break even. It was a high interest loan — one of the few my debt-laden business qualified for. At least I had something to pay the bills.
At first I’d prayed fervently every night — “God please bring my customers back. Please help me to figure this out!” But as the prayer seemed to go unanswered, I’d adopted a stoic “Que sera sera” approach to life. I put my parents on notice. If things got bad enough I’d have to move back home. I contemplated exiting the lease at my Brooklyn storefront. I watched YouTube videos about entrepreneurs who had ‘lost it all’ and bounced back. I know they were meant to be inspiring, but they always made me feel worse.
But there was some magic happening in the soil, underneath the surface of my business.
Average order value is how much a customer typically pays when they buy from your business. It’s a critical number that is key for forecasting potential revenue and profit.
For years my average order value had been stuck at or below $40 — a depressingly low number considering that, in the summer time, insulated shipping alone costs us, on average, $15 a package. That left us with $25 to fulfill each order and somehow turn a profit.
For perspective, Instagram and Facebook advertising — a necessary evil for direct-to-consumer brands like mine — can charge $25 for just one new customer. For years we’d been stuck in this cycle. Our production costs cannibalizing our marketing costs, pushing us to take on debt to do marketing.
I’d been too depressed to look closely at my numbers since I’d stopped my half off discounting. One day I finally dragged myself in front of my laptop, opened up Google spreadsheets and started calculating. Our average order value had shot up to $55.
I blinked, stared at the screen, and ran the formula again. There it was — a $55 average order value steady throughout July. This meant that, after insulated shipping, we had $25 to fulfill an order and $15 to do marketing. It wasn’t a whole lot of marketing money. But the point was — for the first time since I’d launched my brand — I HAD marketing money.
I’d noticed other things too. Vanessa and Rodney were having smoother workdays, and consistently getting orders out within 3 business days — a promise we’d previously struggled and failed to keep. Many orders were now being shipped out the same day they were made.
It wasn’t just that things had slowed down. With Half Off gone we weren’t working twice as hard for a dollar anymore. We were actually getting ahead. The nightmare of chronic order backlog was finally over.
A few weeks passed and I ran my numbers again. My average order value had climbed from $55 to $59.50. My jaw dropped.
I’d assumed that — with 50% Off and Free Samples gone — customers would default to the next cheapest thing. They didn’t. They scrolled past the lower-cost sample packs and invested in bigger sizes and larger orders.
These customers were new, with a small percentage returning, and frankly they baffled me.
Then it suddenly clicked in my brain — for the first time in the history of my brand I was attracting people who DID NOT SHOP ON PRICE but paid attention to value. I studied the digital trails of customers who’d found us for the first time. It seemed they were using reviews as the deciding factor on whether or not to buy. Not how much I was willing to gut my prices.
I still didn’t have quite enough customers to break even, but I was catching up. And for the first time in weeks I began to look *beyond* the crisis. What would it feel like to create and innovate for my customer base without constantly worrying about debt and back taxes? What would it look like for me to run my business from a place of peace, instead of constant anxiety?
I was daring to dream because it was clear; whatever happened, however long it took to get past this mess, there was a healthy business waiting for me on the other side. Click here to read the fifth and final part of this series.